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TMI Blog1976 (11) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... and commerce. The raw hides and skins are converted into dressed hides and skins and are sold either locally or in the course of export. The matter relates to the assessment year 1968-69 and the dispute between the parties arises because of the inclusion in the turnover of the sale and purchase price of some of the above goods. The appellants by means of writ petitions challenged the validity of items 7(a) and 7(b) of the Second Schedule to the State Act. The High Court, as already mentioned, repelled the attack on the validity of those items and dismissed the writ petitions. Before dealing with the contentions advanced, it may be appropriate to refer to the relevant provisions. Section 4 of the State Act is the charging section in respect of declared goods and reads thus: "Tax in respect of declared goods.-Notwithstanding anything contained in section 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year." It may be mentioned that raw hides and sk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Tamil Nadu. Tanning of the aforesaid raw hides and skins within the State of Tamil Nadu and the sale of the same within that State as dressed hides and skins; and (3) Purchase of raw hides and skins within the State of Tamil Nadu and sale of the same within that State as dressed hides and skins after tanning those hides and skins. It is urged that in respect of hides and skins covered by the third category, the local sales of dressed hides and skins will not be liable to tax under the State Act as the purchase of raw hides and skins has already been subjected to tax under item 7(a). Regarding hides and skins mentioned at (1) and (2) above, the local sales of dressed hides and skins would be subject to tax at the rate of 11 per cent under item 7(b) as there was no levy of tax under the State Act in respect of those hides and skins. The learned counsel accordingly concludes from the above that imported hides and skins are subject to tax when sold as dressed hides and skins at the rate of 1½ per cent, whereas hides and skins purchased in raw form locally and dressed thereafter are not subject to tax under the State Act when sold as dressed hides and skins. The conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hides and skins as would appear from that judgment was "2 per cent on the purchase price of those hides and skins in the untanned condition, while the rate of tax on the sale of raw hides and skins in the State during 1955 to 1957 is 3 pies per rupee". The court in this context referred to Mehtab's case [1963] 14 S.T.C. 355 (S.C.)., and observed: "In the earlier case, discrimination was brought about on account of sale price of tanned hides and skins to be higher than the sale price of untanned hides and skins, though the rate of tax was the same, while in the present case, the discrimination does not arise on account of difference of the price on which the tax is levied as the tax on the tanned hides and skins is levied on the amount for which those hides and skins were last purchased in the untanned condition, but on account of the fact that the rate of tax on the sale of tanned hides and skins is higher than that on the sale of untanned hides and skins. The rate of tax on the sale of tanned hides and skins is 2 per cent on the purchase price of those hides and skins in the untanned condition while the rate of tax on the sale of raw hides and skins in the State during 1955 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference between the two rates would constitute a tariff wall or fiscal barrier and thus impede the free flow of inter- State trade and commerce. The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. The scheme of items 7(a) and 7(b) of the Second Schedule to the State Act is that in the case of raw hides and skins which are purchased locally in the State, the levy of tax would be at the rate of 3 per cent at the point of last purchase in the State. When those locally purchased raw hides and skins are tanned and are sold locally as dressed hides and skins, no levy would be made on such sales as those hides and skins have already been subjected to local tax at the rate of 3 per cent when they were purchased in raw form. As against that, in the case of hides and skins which have been imported from other States in raw form and are thereafter tanned and then sold inside the State as dressed hides and skins, the levy of tax is at the rate of 1½ per cent at the point of first sale in the State of the dressed hides and skins. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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